Small steps fail to leave mark on financial reforms

Hungarian officials made clear at the start of January that legislation to improve economic governance and tighten financial services regulation would be a priority.

Six months on, the dream of reaching conclusions on some of these major legislative intiatives in such a short time looks a touch naive.

That is not to say that the goals were not worth striving for, not least because the eurozone’s sovereign-debt crisis continued to rage throughout the six months of Hungary’s presidency. But Hungary is not in the eurozone, making it something of a frustrated bystander, with its diplomats observing from afar the financial rescue package agreed with Portugal and the ongoing discussions aimed at solving Greece’s tribulations.

Six-pack negotiations

If the immediate problems of the eurozone were not within Hungary’s remit, brokering agreement on the so-called six-pack, the six pieces of proposed legislation aimed at strengthening economic governance, certainly was.

The presidency made a highly publicised priority of reaching agreement between the member states and the European Parliament – the first time that MEPs have used their new co-decision powers, granted under the Lisbon treaty, in the area of macro-economics.

Agreement did not come. While building consensus among member states was relatively straightforward, it became increasingly obvious that MEPs favoured a vastly different approach, and Hungarian belief that a deal was possible started, at least behind closed doors, to wane. Momentum began to ebb away from the negotiations.

If Hungary is to be judged simply on whether it managed to obtain agreement between the two sides on this cornerstone of its presidency, the result must be seen as failure. But with more than 2,000 amendments on the six pieces of legislation and a very short period of time to reach a satisfactory outcome, it is widely acknowledged that Hungary pushed as far as it could, with compromises reached in many areas (and, arguably, compromises that are more favourable to the member states’ original positions).

Derivatives regulation

Even more difficulty for Hungary’s negotiators arose from one of the major pieces of legislation in the area of financial services: derivatives regulation.

Significant disagreement between member states – led by the UK in one camp and by Germany in the other – meant that Hungary failed to achieve agreement on this important issue. Sources close to the negotiations said that while Hungarian diplomats “tried their best”, they were undone by the competing forces of two of the EU’s largest (and more experienced, when it comes to this sort of political negotiation) member states.

In areas of the internal market, the presidency was more successful. Picking up from Belgium’s six-month term, Hungary piloted through the legislation necessary to create a unitary patent. And agreement on the consumer-rights directive, which at one stage looked unlikely, was achieved.